Legitimacy – 10 things any business should do
“The strongest is never strong enough to be always the master, unless he transforms strength into right, and obedience into duty.”
– Jean-Jacques Rousseau (1762)
My book on the “Social License” defines the social license concept in relation to three foundational principles: legitimacy, trust and consent. It is the first of these three that is perhaps the most fundamental and hence the subtitle to the book: “How to keep your organisation legitimate”. The word does not appear in many CEO speeches but this does not mean that legitimacy is something not considered by clever business strategists, it is.
I won’t get into the definitional issues on this blog, but I do go on to explore three permutations of the legitimacy relating to both organisation and a specific activity (a little in the way Donald Rumsfeld once talked about knowledge). Organisations might have their own legitimacy but a specific activity does not, or an activity might be legitimate but the organisation might lack it, or both organisation and activity have sufficient legitimacy for the social license to root. It is only in this third variation that I believe social license can exist. I also dismiss cases where both activity and organisation are illegitimate (the fourth permutation) and leave this to the criminologists to discuss.
Anyway, the fourth chapter of my book sets out 10 things any business should do to try and improve its legitimacy – the first seven relate to the business itself, and the other three to the activity in question.
Things that help make a business legitimate:
1. The provision of real value both in financial and social terms
2. Understanding the true social impacts of the business
3. The opportunity cost of the company existing in social terms
4. The efficiency of the business and the effectiveness of its management
5. Company structure, governance and accountability
6. Understanding the different needs of shareholders, stakeholders and rights-holders
7. Paying enough tax and in the right place
And in relation to specific activity:
8. Adequate due diligence: prevention and mitigation
9. The provision of adequate remedies
10. Appropriate levels of transparency and disclosure
Obviously I go into a bit more detail in the book itself but I am interested to hear what might be missing from the list?